Value Added Producer Grant Deadline Approaching

Posted on 11/24/2009 at 12:00 AM by Christa Hartsook

Blog entry written by Michael Boland, professor at Kansas State University and director of the Arthur Capper Cooperative Center.

The VAPG grants are due on November 30th. As in the past, questions continue to accelerate as we move towards the deadline!  One of the big questions I am getting this year is the definition of an eligible entity. The NOFA states the following:

1. Independent Producers (either individuals or business entities) – farmers, ranchers, foresters & fishermen who will produce a majority of the commodities to which value will be added and who will retain ownership of the commodities throughout the value-added process. (An informal group of independent producers – a “steering committee” – may also apply under this category. If selected for funding, the steering committee must form a legal, business entity structure before the award can be made.) Beginning farmers or ranchers are independent producers who have been farming for less than 10 years. They share exclusive access to 10 percent of VAPG funds with socially disadvantaged farmers or ranchers. Socially disadvantaged farmers or ranchers are independent producers where the primary person is either a minority or women. They share exclusive access to 10 percent of VAPG funds with beginning farmers or ranchers.

2. Agricultural Producer Groups – representing & controlled by independent producers

3. Farmer or Rancher Cooperatives – consisting exclusively of independent producers

4. Majority-Controlled Producer-Based Business Ventures – legal business entity that is majority-owned and controlled by independent producers. (Note: Such applicants cumulatively may not receive more than 10 percent of VAPG funds.)

The easiest way for me to describe an eligible entity is that the governance structure must be comprised of a majority of producers. For example, an LLC is commonly comprised of two individuals in many states. If both have equal equity, then both must be independent agricultural producers.  A three-member board would require at least two members be independent producers. Control implies a simple majority or better of independent producers.

I have had several inquire from individuals who are not producers but have developed a supply chain that uses producers. While the intent is good, such an individual would not be an eligible entity. However, there are the Mid-Tier projects, which are involved with a local or regional supply network of producers and food businesses that connects producers with consumers by marketing an eligible value-added product. The applicant is required to be one of the four eligible applicant types described above but a Mid-Tier project involves a Network in which the applicant is involved with other entities that are not VAPG-eligible applicants. The Network must primarily assist family farms with average annual revenues under $700,000. The Network must include at least one ag producer group, cooperative, or business venture that is involved in the marketing strategy.

Remember a “value-added” activity must increase the value realized by a producer for their agricultural commodity by increasing value of the commodity and expanding the market for the commodity – due to any of 5 activities:

1. Commodity processing – processing that changes the commodity’s physical state (e.g., wheat flour, fruit jam, diced tomatoes, biodiesel, ethanol, fish fillets, wool rugs)

2. Nonstandard production method – producing a commodity in a manner that is different from “normal” thereby creating a market identity that increases value (e.g., organic; free-range; natural-fed). This does not include branded products or nonstandard-packaged products. (Note: Proposals in this category are only eligible for working capital grants.)

3. Commodity segregation – physically separating the commodity from other similar commodities during both production & marketing (more than simple sorting by grade). Includes traceability & identity-preserved systems (e.g., GMO-free commodities; varietal purity).

4. Renewable energy – on-farm production of renewable energy either through the conversion of agricultural commodities or their byproducts into energy (e.g., biomass, anaerobic digesters). Wind, solar, geothermal, & hydro projects are only eligible when the energy generated will be used to produce a value-added product.

5. Locally-produced – produced & marketed either within 400 miles or within the same state. (e.g., locally-grown food)

The definition of 400 miles means that the food can travel up to 400 miles and be considered local. This was defined in the 2008 Farm Bill. Thus, northeast farmers can ship locally grown products in many parts of New England.

Good luck in completing your application. Make sure and get the main idea across upfront so those of us reviewing the proposal have a clear understanding of your idea! Let us know if we can help at www.agmrc.org.

Categories: Grants